Who bears the risk?

Deep in the weeds of yesterday’s NY Times story on the Philadelphia Orchestra’s reorganization plan was this little tidbit:

The reorganization plan would call for unfunded pension liabilities to be transferred to the federally backed Pension Benefit Guaranty Corporation, which has assumed responsibility for two of the orchestra’s defined-benefit pension plans. The corporation puts the liabilities at $62 million; the orchestra is proposing to pay $1.3 million. While the sides are still wrangling, orchestra lawyers said they were optimistic that the matter would be resolved.
The move would reduce pensions for seven retired musicians. Three would lose about $12,000 a year and four about $4,000 a year, a spokeswoman said.

These are musicians who spent whole careers in the orchestra, thinking they were earning not only a paycheck but benefits as well, who discovered after their retirement that, regardless of the promises made to them, and the federal laws about pensions, and every other reason to believe that at least one thing in their retirement was certain, had some of that benefit taken away from them by people they trusted to uphold their end of the deal.
It is an article of faith in the union business that defined benefit pension plans are the gold standard for providing retirement benefits. And there are ways in which such plans are superior to defined contribution plans, which are the usual alternative (aside from the employer simply not providing such a benefit). But defined benefit plans do not insulate workers from risk. In particular, such plans indirectly and subtly expose workers to potentially significant amounts of investment risk.
How? It’s obvious that the actual retirement benefit a defined contribution plan produces is dependent on how well the underlying investments perform over time. But, if the assets underlying a defined benefit plan perform poorly, the worker is at risk as well – whether from the resulting need to “top up” the assets draining the employer of money that could be used to pay workers, or from pushing the employer into bankruptcy to rid itself of those unexpected obligations. Adding insult to injury is the fact that such drains on institutional financial health invariably come when everything else is going badly – or, to put it another way, the correlation between pensions needing massive infusions of cash to stay legal and institutional income going south is very, very high.
The NY Times article hints at this:

Shedding pension obligations was a main reason for filing for bankruptcy protection, the orchestra has acknowledged. Richard Worley, its chairman, said the ensemble would save more than $3.5 million a year.

Most of us had thought that what Philly was trying to do in the bankruptcy was to rid itself of its CBA and the AFM-EP Fund. But I suspect that the underlying driver, if their situation was anything like that of my orchestra, was the need to stop the unending demands for massive infusions of cash from their frozen private pension plan.